We develop a model of informal risk-sharing in social networks, where relationships between individuals can be used as social collateral to enforce insurance payments. We characterize incentive compatible risk-sharing arrangements and obtain two results. (1) The degree of informal insurance is...

This paper builds a theory of informal contract enforcement in social networks. In our model, relationships between individuals generate social collateral that can be used to control moral hazard when agents interact in a borrowing relationship. We define trust between two agents as the maximum...

We seed noisy information to members of a real-world social network to study how information diffusion and information aggregation jointly shape social learning. Our environment features substantial social learning. We show that learning occurs via diffusion which is highly imperfect: signals...

The DeGroot model has emerged as a credible alternative to the standard Bayesian model for studying learning on networks, offering a natural way to model naive learning in a complex setting. One unattractive aspect of this model is the assumption that the process starts with every node in the...

Evidence from social psychology suggests that agents process information about their own ability in a biased manner. This evidence has motivated exciting research in behavioral economics, but has also garnered critics who point out that it is potentially consistent with standard Bayesian...

The division of labor first increased during industrialization and then decreased again after 1970 as job roles have expanded. We explain these trends in the organization of work through a simple model where (a) machines require standardization to exploit economies of scale and (b) more...

We conduct field experiments in a large real-world social network to examine why decision makers treat friends more generously than strangers. Subjects are asked to divide surplus between themselves and named partners at various social distances, where only one of the decisions is implemented....

Celebrity endorsements are often sought to influence public opinion. We ask whether celebrity endorsement per se has an effect beyond the fact that their statements are seen by many, and whether on net their statements actually lead people to change their beliefs. To do so, we conducted a...

We study a model of social learning and communication using hard anecdotal evidence. There are two Bayesian agents (a sender and a receiver) who wish to communicate. The receiver must take an action whose payoff depends on their personal preferences and an unknown state of the world. The sender...

We organized business associations for the owner-managers of randomly selected young Chinese firms to study the effect of business networks on firm performance. We randomized 2,800 firms into small groups whose managers held monthly meetings for one year, and into a “no- meetings” control...